Contract- II

Topic-Contract of Agency
PPT-16
-BY-
Neha Sharma
Assistant Professor
National Law Institute University Bhopal
 Contract of Agency
 The law of agency is based on the Latin
maxim “qui facit per alium, facit per se,”
which means, “he who acts through another is
deemed in law to do it himself”.
 Chapter X of the Indian Contract Act, 1872
provides the basic structure of rules and
regulations that basically govern the
performance and formation of any type of
contract including the agency contract.
 Contract of Agency
 Creation of an agency
• By express or implied contract- A principal
may implicitly or expressly employ an agent.
The appointment may be expressed in writing
or it may be oral.
• By conduct of party or situation– E.g.
estoppel- Whereby a person allows another to
act for him to such an extent that a third
party reasonably believes that an agency
relationship exists between the two.
 Contract of Agency
 Creation of an agency
• By ratification- assent is given either to an act
done by someone who had no previous
authority to act or to an act that exceeded the
authority granted to an agent.
• By Necessity- a person acts for another in an
emergency situation without express
authority to do so.
 Contract of Agency
 Duties of an agent

• Duty to follow instructions of principal

• Duty of reasonable care and skill
• Duty to avoid conflict of interest
• Duty not to make secret profit
• Duty to remit sums
• Duty to maintain accounts
• Duty not to delegate
 Contract of Agency
 Rights of an agent
• Right to remuneration– an agent is entitled to
get an agreed remuneration as per the
contract. If nothing is mentioned in the
contract about remuneration, then he is
entitled to a reasonable remuneration. But an
agent is not entitled for any remuneration if
he is guilty of misconduct in the business of
agency.
 Contract of Agency
• Right of retainer– an agent has the right to
hold his principal’s money till the time his
claims, if any, of remuneration or advances
are made or expenses occurred during his
ordinary course of business as agency are
paid.
• Right of lien– an agent has the right to hold
back or retain goods or other property of the
principal received by him, till the time his
dues or other payments are made.
 Contract of Agency
• Right to indemnity– an agent has the right to
indemnity extending to all expenses and
losses incurred while conducting his course of
business as agency.
• Right to compensation– an agent has the right
to be compensated for any injury suffered by
him due to the negligence of the principal or
lack of skill.
 Contract of Agency

 Section 191 of the Indian Contract Act, 1872

defines sub-agent. According to this section “a
sub-agent is a person employed by, and acting
under the control of, the original agent in the
business of the agency.”
 Contract of Agency
 Thus there are two types of delegation by
agent–
• Proper delegation– This comes under section
192 of the Indian Contract Act, 1872. This is
when an agent having the authority to do so,
appoints a sub-agent.
• Improper delegation– This comes under
section193 of the Indian Contract Act, 1872.
This is when an agent without any authority
appoints a sub-agent.